Commerce Bancshares Posts Strong Q3 Earnings Amid Rising Credit Loss Provisions

Ticker: CBSH · Form: 10-Q · Filed: Nov 10, 2025 · CIK: 22356

Sentiment: mixed

Topics: Regional Banking, Earnings Report, Credit Quality, Interest Rates, Loan Growth, Financial Performance, Economic Outlook

Related Tickers: CBSH

TL;DR

**CBSH is playing defense with higher credit loss provisions, but their net income growth and expense management make it a solid hold in a shaky market.**

AI Summary

COMMERCE BANCSHARES INC /MO/ reported a net income attributable to Commerce Bancshares, Inc. of $141.5 million for the three months ended September 30, 2025, an increase of 2.5% from $138.0 million in the same period of 2024. For the nine months ended September 30, 2025, net income rose 9.0% to $425.6 million from $390.2 million in 2024. Total interest income increased slightly to $374.1 million for the three months ended September 30, 2025, up from $372.1 million in 2024, while total interest expense decreased by 13.8% to $94.6 million from $109.7 million, primarily due to lower interest on deposits. Net interest income after credit losses increased to $259.4 million for the quarter, up from $253.2 million in 2024. The provision for credit losses significantly increased to $20.1 million for the quarter, compared to $9.1 million in 2024, reflecting a more cautious outlook. Total assets grew to $32.3 billion as of September 30, 2025, from $32.0 billion at December 31, 2024, driven by an increase in net loans to $17.6 billion from $17.1 billion. Non-interest income saw a modest rise to $161.5 million for the quarter, up from $159.0 million in 2024, with trust fees increasing to $58.4 million from $54.7 million.

Why It Matters

This 10-Q reveals CBSH's ability to grow net income despite a significant increase in credit loss provisions, signaling management's proactive stance on potential economic headwinds. For investors, the 9.0% year-over-year increase in nine-month net income to $425.6 million is a positive indicator of profitability, but the doubling of credit loss provisions to $40.1 million for the nine months suggests caution. Employees might see stability given the bank's solid performance, while customers could face tighter lending standards as the bank prepares for a 'softer labor market.' Competitively, CBSH's ability to manage interest expenses effectively, down 13.8% for the quarter, positions it well against peers in a volatile interest rate environment.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant increase in the provision for credit losses, which more than doubled to $20.1 million for the three months ended September 30, 2025, from $9.1 million in the prior year. This reflects management's expectation of 'significant downside risks, including a softer labor market,' indicating potential future loan defaults. Additionally, the company's 'overall economic forecast' includes an expected 25 basis point Federal Reserve rate cut, which could impact net interest margins.

Analyst Insight

Investors should monitor CBSH's loan portfolio quality closely, especially given the increased provision for credit losses and the 'softer labor market' forecast. While net income is growing, the proactive risk management suggests potential headwinds. Consider holding existing positions but exercise caution before increasing exposure, awaiting further clarity on economic conditions and their impact on loan performance.

Financial Highlights

revenue
$535.6M
total Assets
$32.29B
total Debt
$2.48B
net Income
$141.5M
cash Position
$476.4M
revenue Growth
+0.7%

Revenue Breakdown

SegmentRevenueGrowth
Interest Income$374.1M+0.5%
Interest Expense$94.6M-13.8%
Non-Interest Income$161.5M+1.6%

Key Numbers

Key Players & Entities

FAQ

What was Commerce Bancshares Inc.'s net income for the third quarter of 2025?

Commerce Bancshares Inc.'s net income attributable to Commerce Bancshares, Inc. for the three months ended September 30, 2025, was $141.5 million, an increase from $138.0 million in the same period of 2024.

How did the provision for credit losses change for CBSH in Q3 2025?

The provision for credit losses for CBSH significantly increased to $20.1 million for the three months ended September 30, 2025, compared to $9.1 million for the same period in 2024, reflecting a more cautious economic outlook.

What were the total assets for Commerce Bancshares Inc. as of September 30, 2025?

As of September 30, 2025, Commerce Bancshares Inc. reported total assets of $32.289 billion, an increase from $31.997 billion at December 31, 2024.

Did CBSH's net interest income increase or decrease in Q3 2025?

CBSH's net interest income increased to $279.457 million for the three months ended September 30, 2025, up from $262.351 million in the same period of 2024.

What is the strategic outlook for Commerce Bancshares Inc. regarding the economy?

Commerce Bancshares Inc.'s key assumption in its allowance for credit loss model at September 30, 2025, is that the US economy faces 'significant downside risks, including a softer labor market,' and includes an expected 25 basis point Federal Reserve rate cut.

How much did CBSH's loans grow by in the nine months ended September 30, 2025?

Net loans for CBSH increased to $17.611 billion as of September 30, 2025, from $17.057 billion at December 31, 2024, representing a growth of $554 million.

What was the change in total interest expense for CBSH in Q3 2025?

Total interest expense for CBSH decreased by 13.8% to $94.648 million for the three months ended September 30, 2025, from $109.717 million in the prior year, primarily driven by lower interest on deposits.

What impact do rising credit loss provisions have on CBSH investors?

Rising credit loss provisions, which more than doubled to $20.1 million in Q3 2025, indicate management's expectation of potential future loan defaults due to a 'softer labor market.' This could signal reduced future profitability or increased financial instability, prompting investors to monitor loan quality closely.

What types of loans are included in Commerce Bancshares Inc.'s portfolio?

Commerce Bancshares Inc.'s loan portfolio includes Commercial loans (Business, Real estate – construction and land, Real estate – business) and Personal Banking loans (Real estate – personal, Consumer, Revolving home equity, Consumer credit card, Overdrafts).

What was the total non-interest income for CBSH in the third quarter of 2025?

Total non-interest income for CBSH was $161.511 million for the three months ended September 30, 2025, a slight increase from $159.025 million in the same period of 2024, with trust fees contributing $58.412 million.

Risk Factors

Industry Context

Commerce Bancshares operates in the highly competitive banking sector, facing pressure from traditional banks, credit unions, and increasingly, fintech companies. Key industry trends include evolving customer expectations for digital services, ongoing regulatory scrutiny, and the impact of interest rate environments on net interest margins and loan demand.

Regulatory Implications

The banking industry is subject to stringent regulations from bodies like the Federal Reserve and OCC. Compliance with capital requirements, consumer protection laws, and anti-money laundering regulations is paramount. Any changes in these regulations, or failures in compliance, can significantly impact operations and profitability.

What Investors Should Do

  1. Monitor the trend in the provision for credit losses.
  2. Analyze the drivers of net interest income.
  3. Evaluate the growth in non-interest income.

Key Dates

Glossary

Provision for Credit Losses
An expense set aside by a financial institution to cover potential losses from loans that may not be repaid. (An increase in this provision signals management's concern about the quality of the loan portfolio and potential future defaults.)
Net Interest Income After Credit Losses
The difference between interest income earned and interest expense paid, adjusted for the provision for credit losses. (This metric reflects the core profitability of the bank's lending and borrowing activities after accounting for expected loan losses.)
Non-Interest Income
Revenue generated from sources other than traditional interest-bearing activities, such as fees from services, trading, and trust activities. (Diversifies revenue streams and can be a significant contributor to overall profitability, especially in periods of stable interest rates.)
Allowance for Credit Losses on Loans
A contra-asset account that reduces the carrying amount of loans to their estimated net realizable value. (Represents the cumulative estimate of expected credit losses on the loan portfolio.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, Commerce Bancshares Inc. reported a modest 2.5% increase in net income for Q3 2025, reaching $141.5 million. While total interest income saw a slight uptick, a significant 13.8% decrease in interest expense, primarily from lower deposit costs, boosted net interest income. However, a substantial 119.5% increase in the provision for credit losses to $20.1 million signals a more cautious stance on asset quality. Total assets grew slightly to $32.3 billion, driven by loan growth, while non-interest income experienced a modest rise.

Filing Stats: 4,456 words · 18 min read · ~15 pages · Grade level 17.4 · Accepted 2025-11-10 13:43:07

Key Financial Figures

Filing Documents

Financial Statements

Financial Statements Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 3 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) 4 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) 5 Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) 6 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (unaudited) 8

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 9 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 50 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 76 Item 4.

Controls and Procedures

Controls and Procedures 76 Part II Other Information Item 1.

Legal Proceedings

Legal Proceedings 77 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 77 Item 5. Other Information 77 Item 6. Exhibits 77

Signatures

Signatures 79 2 Table of Contents

: FINANCIAL INFORMATION

PART I: FINANCIAL INFORMATION

FINANCIAL STATEMENTS

Item 1. FINANCIAL STATEMENTS Commerce Bancshares, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS September 30, 2025 December 31, 2024 (Unaudited) (In thousands) ASSETS Loans $ 17,786,767 $ 17,220,103 Allowance for credit losses on loans ( 175,671 ) ( 162,742 ) Net loans 17,611,096 17,057,361 Loans held for sale (including $ 2,163,000 and $ 2,981,000 of residential mortgage loans carried at fair value at September 30, 2025 and December 31, 2024, respectively) 2,538 3,242 Investment securities: Available for sale debt, at fair value (amortized cost of $ 9,687,084,000 and $ 10,127,426,000 at September 30, 2025 and December 31, 2024, respectively, and allowance for credit losses of $ — at both September 30, 2025 and December 31, 2024) 8,998,586 9,136,853 Trading debt 56,282 38,034 Equity 53,193 57,442 Other 227,430 230,051 Total investment securities 9,335,491 9,462,380 Federal funds sold — 3,000 Securities purchased under agreements to resell 850,000 625,000 Interest earning deposits with banks 2,477,668 2,624,553 Cash and due from banks 476,441 748,357 Premises and equipment – net 483,000 475,275 Goodwill 146,539 146,539 Other intangible assets – net 13,329 13,632 Other assets 892,586 837,288 Total assets $ 32,288,688 $ 31,996,627 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $ 7,489,645 $ 8,150,669 Savings, interest checking and money market 15,551,799 14,754,571 Certificates of deposit of less than $100,000 1,002,640 996,721 Certificates of deposit of $100,000 and over 1,413,965 1,391,683 Total deposits 25,458,049 25,293,644 Federal funds purchased and securities sold under agreements to repurchase 2,473,065 2,926,758 Other borrowings 9,270 56 Other liabilities 555,257 443,694 Total liabilities 28,495,641 28,664,152 Commerce Bancshares, Inc. stockholders' equity: Common stock, $ 5 par value Authorized 190,000,000 ; issued 135,210,812 shares at both September 30, 2025 and December 31, 2024 676

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (Unaudited) 1. Principles of Consolidation and Presentation The accompanying consolidated financial statements include the accounts of Commerce Bancshares, Inc. and all majority-owned subsidiaries (the Company). Most of the Company's operations are conducted by its subsidiary bank, Commerce Bank (the Bank). The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments necessary to present fairly the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications were made to 2024 data to conform to current year presentation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and revenues and expenses for the periods. Actual results could differ significantly from those estimates. Management has evaluated subsequent events for potential recognition or disclosure. The results of operations for the nine month period ended September 30, 2025 are not necessarily indicative of results to be attained for the full year or any other interim period. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company's most recent Annual Report on Form 10-K, containing the latest

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